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What is Forex Trading ?

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The word "forex" is a syllable fragment of two words in English, "foreign" and "exchange". This term is familiar in the world of currency trading.

Forex trading is growing along with the emergence of new brokers by taking advantage of the latest promotions in attracting investors.

Forex Trading, Between Risk and Profit


Between "risk" and "profit", so the world of forex trading. Therefore, your financial management is very important. Think carefully about your deposit, lots traded, margin percentage, and so on. With the right steps, you can control the "risk" that may occur.

Commonly traded "major pairs" are EUR/USD, GBP/USD, USD/JPY, and USD/CHF. The "Major Pair" grouping varies by broker. For example, some brokers include AUD/USD in this category, as well as NZD/USD. Usually brokers prefer to trade "Major Pair" because of its low "spread".

Popular Instruments On The Market


Forex


Currency pairs, including the majors, minors and exotics

Stock Indices & Oil


Get access to major international stock indices and Oil

Metals


Speculate on the price movements of Gold and Silver against the US dollar and diversify your trading portfolio

Bonds


Take advantage of the inverse relationship between interest rates and bond prices and leverage the stability of government treasuries

Cryptocurrencies


Get direct exposure to the world’s leading cryptocurrencies including Bitcoin, Ethereum and Litecoin

Stocks


Trade CFD Stocks on a range of top-class companies

How Forex Trading Works


Deposit a sum of money to the trading account. Make transactions on the platform, be it on a desktop or mobile phone. After placing an order, you should wait for the right time to close the order. Of course, what is expected is profit, but in certain strategies a stop loss is also required.

During trading, you should pay attention to the margin level. Do not let the trading account margin drop to Margin Call or Stop Out. In conditions of thin margins you need to make an additional deposit. read more

The Origin of Buying and Selling Currency


To reach a global agreement for the determination of the exchange rate is not easy and requires a long process.

Gold Standard System


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This idea emerged in 1875. At first, the use of silver and gold as a means of payment was carried out by countries in the world before the rules regarding the gold standard. However, there is a problem, the value of gold and silver is influenced by global supply and demand. For example the discovery of a new gold mine will usually suppress the price of gold.

In the end, the government carried out a method of guaranteeing an exchange rate with a currency in a certain amount of gold, and vice versa called the Gold Standard System, in which the currency could be backed up by an equivalent amount of gold. Thus, the government must have gold reserves that can meet if there is a demand on currency exchange.

As time goes by, the difference in the price of 1 ounce of gold between 2 different currencies begins to appear, so that it becomes the foreign exchange rate between the 2 currencies. This was the beginning of the emergence of foreign exchange in the world.

But unfortunately the gold standard system collapsed at the beginning of World War I. Due to the feud with Germany, countries in Europe began to think about completing large military projects. So at that time, they started printing money to finance the project. The financial needs for the project were considered very large, so they lacked gold to be able to back up the large amounts of money they had printed. This eventually leads to inflation.

Bretton Woods System


A meeting was held by the Allied Alliance before the end of World War II, in order to create a monetary system so that it could enter and fill the void that had arisen due to the breakdown of the Gold System Standard. In 1944 to be precise in July, more than 700 allied representatives held a meeting in Bretton Wood, South America. The purpose of this meeting is to produce an agreement known as the Bretton Woods System, this is a form of international monetary management.

The Bretton Woods System stipulates, among other things: -The method of using a fixed foreign exchange rate USD to replace the Gold Standard System and become the main currency -Forming 3 International Agencies to monitor economic activity in the world. The 3 bodies are: the International Monetary Fund, the International Bank for Reconstruction and Development, and the General Agreement on Tariffs and Trade.

While the main feature of this system is the US dollar which is a substitute for gold as the main currency of exchange in the world. The US dollar is the main currency in the world that will continue to be protected. This later became one of the reasons for the failure of the Bretton Wood System.

25 years later this system is having some problems. In the early 1970s, gold reserves owned by the United States were very small as a result the United States Department of the Treasury did not have enough gold to cover the US dollars held by the world"s central banks. Until finally in 1971, precisely in August, Richard Nixon, who was the President of the United States at that time, took steps to reject the request for an exchange of US dollars for gold. This marked the end of the Bretton Woods System.

Although this system did not last long, it had a significant impact. The 3 bodies that were formed have transformed into IMF International Bank for Reconstruction and Development (now part of the World Bank) GATT, which later transformed into the World Trade Organization (WTO).

George Soros, A Successful Trader


“The Man Who Broke the Bank of England”, as Soros was nicknamed who managed to make over 1.2 billion USD on short sterling trades, at a time when the British government ignored the European Exchange Rate Mechanism (ERM) and the pound was devalued up to 20% on September 16, 1992. His Hedge Fund Quantum has been making returns of around 20 percent per year on average, since 1969. This is a remarkable result. The years he personally ran it yielded a 30% return and two years at 100%.

“I’m only rich because I know when I’m wrong…I basically have survived by recognizing my mistakes.”“My approach works not by making valid predictions but by allowing me to correct false ones.”

“I’m only rich because I know when I’m wrong…I basically have survived by recognizing my mistakes.”

“My approach works not by making valid predictions but by allowing me to correct false ones.”

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”

“The markets are always on the side of exuberance or fear. It’s fear and greed. Right now greed has the better of it, which is rather nice (for investors) as long as it doesn’t get out of hand,” So said Soros.

Source : www.newtraderu.com


Each forex broker has its own rules about forex trading, such as about spreads, swaps, stop-out percentages, margin calls, and so on. Trader should choose for himself which broker is suitable for him from the advantages and disadvantages of trading rules.

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